He added that the bank's projected path of the exchange rate posed elevated risks to inflation, which could worsen the impact of a previous weakening on prices.

The shilling is down 21.7 percent against the dollar this year.

"A tighter monetary policy stance is warranted to forestall risks of higher inflation," Tumusiime-Mutebile said, adding the action would help annual core inflation to stay in single digits and head towards the bank's medium target of 5 percent.